National Health Service

Handing over control

Promises to make the NHS independent offer a false prospectus

THE National Health Service will spend £96 billion ($178 billion) this financial year. This enormous budget—bigger than most of the world's economies—will gobble up nearly a fifth of total government expenditure. The decision in 2000—made virtually off the cuff by Tony Blair in a television interview—to force-feed the NHS with extra money for the best part of a decade was a defining moment in his administration. As a result, publicly financed health spending will reach nearly 8% of GDP next year, compared with 5.4% when Labour took office in 1997 (see chart).

Historically, politicians have kept the NHS on a tight rein in return for the taxes that pay for it. With so much extra money now going into the health service, the case for tightening that grip might appear unanswerable. Yet, remarkably, both the men jousting for Mr Blair's inheritance say they want to make the NHS independent.

Gordon Brown, the chancellor of the exchequer and favourite to succeed Mr Blair, set out this ambition last month. David Cameron, the Conservative leader, will have to wait until the next election for his chance to become prime minister. But he, too, wants to emancipate the NHS, as he spelt out in a speech on October 9th.

For Mr Brown, the policy would be a feat to match his early decision to make the Bank of England operationally independent. The success of that reform, which has helped keep the economy stable over the past nine years, still redounds to his credit. Offering to repeat the trick with the NHS may help to get rid of the “control-freak” label that hinders his prospects of becoming and remaining prime minister.

The policy appeals to Mr Cameron for a different reason. He knows that the electorate's distrust of the Conservative Party as a steward of the NHS has played a big part in its election defeats over the past decade. Mr Cameron told the Tory party conference last week that his priority could be spelt out in three letters: “NHS”. His new commitment to make it independent is designed to dispel doubts that he was just grandstanding.

Politics may explain why the proposed reform has become so voguish, but what matters is whether it would make the NHS work better. The policy has obvious merit compared with Labour's incessant interference in the health service for most of its nine years in office. Ministers have tested micro-management to destruction, setting reams of detailed targets that have tied managers and doctors in knots, often with damaging side-effects. For example, the campaign to reduce waiting times has entailed high rates of bed occupancy, which make hospital infections like MRSA more likely to spread.

With good reason, Labour ministers are no longer so keen on targets. The government has retained some crucial objectives, notably the pledge to achieve by 2008 a maximum all-in waiting time for elective treatment, from a family doctor's referral to the operating table, of 18 weeks. But the Health Department now highlights patient choice rather than targets as the way to chivvy along the NHS.

Indeed independence can be seen as the logical step in a chain of recent reforms that mark Labour's retreat from the top-down target regime. These are turning the health service into an internal market in which primary-care trusts (PCTs)—local purchasing organisations—can increasingly buy health care from private providers as well as publicly owned hospitals. Independent treatment centres are expected, for example, to provide 7-8% of publicly financed elective care by 2008.

In the past, the NHS was virtually synonymous with its publicly owned hospitals. These traditional providers will remain important as one arm of the new health service, but PCT-led commissioning is becoming an increasingly significant second arm. The underlying purpose of the NHS is ceasing to be the public provision of health care. Instead it is becoming the purchase of medical treatment from any provider, public or private, as long as it is free at the point of use.

The Conservatives' proposal in effect formalises this split. Ministers would remain responsible for the total amount of money spent on the health service, as well as the scope of what it covers. But an independent NHS board would be given responsibility for allocating resources, commissioning services and raising standards. Meanwhile, a new economic regulator would authorise providers and promote competition between them. An inspectorate based on the Healthcare Commission (see article) would act to ensure that quality standards were met.

In practice, however, it will be difficult to divorce the NHS from political control. The Bank of England does not provide a pertinent model. The bank has a clear target—keeping inflation at bay—which it can achieve by altering the cost of money. By contrast, there will always be a range of political objectives for the NHS, some of which involve tricky compromises such as the trade-off between the quality of medical care and its cost. And there is scant agreement on how best to achieve these goals in health care (whereas, with the bank, there is no doubt that interest rates can be used to control inflation).

This won't hurt enough

Even if it were realistic to make the NHS independent, this may not be the right time. The health service is at last moving in the right direction—towards greater choice and competition—but only because of the impetus for reform that has been driven by Mr Blair. An independent NHS board would find it much more difficult to force the pace of change.

A case in point is the planned rationalisation of hospital services. Pushing through such unpopular closures of emergency facilities requires political will. The Conservatives' backing for an independent NHS would command greater credibility if they were not intent on opposing these overdue reductions in excess capacity through their populist campaign to “Stop Brown's NHS Cuts”.

Labour's recent reforms have sought to improve the health service by increasing the play of market pressures—for example, through a payments system that ties hospital budgets more closely to how busy they are. But as long as the taxpayer continues to pay for the NHS, it is surely idle to suppose that politicians can, should or will surrender control over the health service by making it genuinely independent.